Adventure in the nature of trade can cover an isolated transaction entered into with profit expectation and taxed accordingly.

Surplus from the acquisition and realisation of actionable claims may be treated as taxable income where the transaction, on the totality of the circumstances, has the character of an adventure in the nature of trade. The relevant inquiry under the business definition in the Indian Income-tax Act, 1922 is whether an isolated or unusual transaction bears the essential features of a trading venture and was entered into with an expectation of profit. The absence of the taxpayer's ordinary business in actionable claims is not decisive if the surrounding facts, including lack of business necessity and prompt realisation, point to a profit-making venture.

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Issues: Whether the surplus arising from the acquisition and realisation of two actionable claims was assessable as income as an adventure in the nature of trade.

Analysis: The relevant inquiry under the definition of business in section 2(4) of the Indian Income-tax Act, 1922, is whether the transaction, though not ordinary trade, bears the essential features of a trading venture judged on the total effect of all relevant circumstances. The company acquired the claims after it had already taken over the running businesses, was under no compulsion to do so, and realised surplus shortly thereafter. The surrounding circumstances, including the absence of any business necessity and the proximity between acquisition and realisation, showed that the acquisition was made with an expectation of profit. The fact that the company's main business did not include dealing in actionable claims was not decisive.

Conclusion: The surplus was assessable as income arising from an adventure in the nature of trade and was taxable under section 10 of the Indian Income-tax Act, 1922.

Ratio Decidendi: A single or isolated transaction may constitute an adventure in the nature of trade if, on the totality of the circumstances, it is entered into with the character of a trading venture and an expectation of profit.

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